On January 1, 2018, Company X is holding $10,000,000, 5% fixed-rate debt which matures in 4 years. To hedge this debt, Company X enters into a 4-year interest rate swap to receive 5% and pay LIBOR on a notional of $10,000,000. Settlement and rate reset is each December 31. The following information is available: DATE LIBOR FMV of Swap Jan. 1, 2018 5% Dec. 31, 2018 4.7% $81,450 Dec. 31, 2019 5.8% ($147,300) In an orderly manner, prepare the appropriate entries for the interest payment, swap settlement (if applicable) and necessary adjustments for 2018 and 2019.

On January 1, 2018, Company X is holding $10,000,000, 5% fixed-rate debt which matures in 4 years. To hedge this debt, Company X enters into a 4-year interest rate swap to receive 5% and pay LIBOR on a notional of $10,000,000. Settlement and rate reset is each December 31. The following information is available: DATE LIBOR FMV of Swap Jan. 1, 2018 5% Dec. 31, 2018 4.7% $81,450 Dec. 31, 2019 5.8% ($147,300) In an orderly manner, prepare the appropriate entries for the interest payment, swap settlement (if applicable) and necessary adjustments for 2018 and 2019.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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